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Corporate Report

Published on: Feb. 26, 2023, 2:47 p.m.
How Zaggle disrupted the fintech system
  • Raj: we believe in an integrated value proposition

By Lancelot Joseph. Executive Editor, Business India

Zaggle is not just another fintech player. Sitting at the intersection of the software as a service (SaaS) and fintech ecosystems, Zaggle’s ecosystem caters to the specialised segment of business spend management, including the rewards and incentive management of employees. Not only that, the platform can also manage gift card programs of merchants. It also boasts one of the largest numbers of issued prepaid cards in India. Zaggle accounts for about 12.7 per cent of the country’s total prepaid transaction value as of March 2022.

On its platform, Zaggle offers a wide range of financial products and services for its business customers and users. It has thus earned a reputation as a diversified fintech and SaaS player. The platform is not only gaining customers rapidly at low cost, but is also generating significant cash.

Little surprise, Zaggle has disrupted the market with its value proposition and range of financial technology and products for businesses, employees, channel partners, and merchants. “Our mission is to make financial management easy and accessible for everyone, regardless of their background or location,” explains Avinash Ramesh Godkhindi, MD & CEO of Zaggle who is constantly innovating and expanding the offerings to help customers and their employees manage their finances with ease.

All-round platform

The fintech and employee solutions business has inherent advantages. Zaggle has a user base from across industries, including banking and finance, technology, healthcare, manufacturing, FMCG, infrastructure and automobiles, among others. Interestingly, the firm has expanded its customer user base without spending much on marketing spends like many other fintech players.

“Zaggle is sector-agnostic, and we are committed to providing innovative and efficient solutions to our customers. Our diversified and customer-centric approach has allowed us to establish a strong presence in the market and drive growth for our customers and partners,” adds Godkhindi.

For any business, managing expenses can be a cumbersome task, especially when it involves a high volume of travel and transportation expenses. In a recent LinkedIn post, one of Zaggle’s clients Anirudh Patil, Head of Finance at FarMart, a firm with over 400 employees, stated this was a challenge as his team of field associates were constantly on the move. With a large number of employees, expenses can easily get out of control if not managed properly. Anirudh tried out several EMS software options but was unable to find a solution that could meet all his requirements.

That’s when he turned to Zaggle, which helped in not only managing employee expenses but also streamlining the entire process. Working closely with the Zaggle team, Patil’s finance team trained its people on how to use the platform, including its intuitive wallet feature that could be used for expense and meal management.

With Zaggle, Patil found a solution that was tailored to his company’s specific needs. “It’s kind of a one-stop solution for all our employee management, employee accounts along with the salary,” he notes. This is a testament to the versatility and effectiveness of the platform, which offers a range of features designed to make expense management simple and hassle-free.

Besides, Zaggle’s multi-product suite connects to any ERP solution. One of its products is ‘Propel’, a corporate SaaS platform that facilitates channel rewards and incentives, as well as employee rewards and recognition. Additionally, Zaggle offers ‘Save’, a SaaS-based platform that helps businesses manage their expenses more efficiently, including digitised employee reimbursements and employee tax benefits.

  • Godkhindi: making financial management easy and accessible

For merchants, Zaggle’s CEMS platform is a customer engagement management system that allows them to comprehensively manage their customer experiences, including rewarding customers through gift card and loyalty benefits. Additionally, the Zaggle ‘Payroll Card’ provides an alternative to direct deposits to bank accounts or cash payments. It allows businesses to pay contractors, consultants, seasonal and temporary employees, and unbanked wage workers.

Further, in 2022 Zaggle launched ‘Zoyer’ – a platform to provide its customers with an integrated and seamless experience. The platform embeds automation, intelligence, and payments into core invoice to pay workflows, providing insights into enterprise-wide spends. It allows digitised management of cash outflows and improves business performance.

“At Zaggle, we believe in an integrated value proposition through our SaaS platform, providing a combination of payment instruments as well as an integrated mobile application that digitises business and employee spends,” says Raj N, Executive Chairman, Zaggle who offers clients a configurable platform for each customer, enabling partner on-boarding and automated workflows to track spends and reconciliations.

In fact, in May 2021, Zaggle offered its Propel solution to a multinational telecommunications company. The results were that Propel increased employee engagement with the seamless API integrations and the telecommunications company’s HR management system helped Zaggle foster a relationship that has lasted for around 2 years.

Similarly, in May 2021, Zaggle onboarded 13 group entities of an Indian diversified financial services firm with its Save Employee Flexi solution. This highlights Zaggle’s ability to provide solutions that cater to diverse customer needs and drive tangible results.

The network effect

Zaggle’s customers can plug in their systems with APIs and easily integrate the management and employee data. Once integrated, this provides a comprehensive fintech platform for a wide range of businesses and individuals. Due to this ease of use, Zaggle has been able to scale up at a rapid pace. Large corporate accounts, with over 250 users, are acquired through a combination of inbound, outbound, and partner demand generation. SMB (small and medium business) accounts, for organisations with 250 or fewer users, are typically acquired through low-cost, low-touch, self-service digital marketing initiatives.

Overall, corporate accounts increased from 326 in March 2020 to 1,436 as on June 2022. Zaggle has also seen SMB accounts increase from 101 to 460 customers in the same period, which is a stupendous increase. Besides, Zaggle can offer third-party associations through the same dashboard, which enables it to cross-sell products to its wide user base. In fact, Zaggle has collaborated on value-added services such as insurance, investment, tax planning, and other finance products which its customers can access.

As Raj puts it: “At Zaggle, we are committed to providing our clients with a one-stop-shop for all their SaaS and fintech needs, offering unparalleled convenience and efficiency.”  In fact, Zaggle benefits due to a strong network effect. But what exactly is a strong network effect? In simple terms, a network effect occurs when the value of a product or service increases as more people use it. For example, social media platforms become more useful as more people join them, since there are more people to connect and communicate with.

Similarly, Zaggle’s fintech offerings become more valuable as more businesses, employees, channel partners, customers, merchants, and banks are added to the platform. Its ecosystem allows parties with complementary services to connect, creating a network effect that benefits everyone involved. Businesses can digitise their spend management and rewards systems, while employees can enjoy streamlined processes for managing their expenses, benefits, and incentives. Further, channel partners can easily manage their rewards and recognition programs.

  • Zaggle is sector-agnostic, and we are committed to providing innovative and efficient solutions to our customers

Customers and merchants benefit from Zaggle’s payment instruments too. These work both online and offline at outlets where Visa cards are accepted in India. Banks can also benefit from Zaggle’s API integrations, which provide them with access to Zaggle’s user base.

In-house technology

In addition to its network effect, Zaggle’s in-house developed technology is another key factor that sets it apart from other fintech players. Hence, Zaggle’s customers can configure their specific requirements on the platform. Their platform can easily be used to set spending limits for employees, prohibit some spends (such as alcohol), and manage corporate spending more efficiently. Further, Zaggle’s mobile application, which has been introduced for the convenience of customers, provides customers with a real-time view of their card details, account balance, and transactions. It also allows for bills to be uploaded, approved and reimbursed.

Hence, its ecosystem provides a compelling value proposition to everyone. The company’s online platform, which includes its mobile application and website, forms the cornerstone of its online presence. With almost 2 million users as of 30 June, 2022, Zaggle’s current platform can easily handle a large volume of users. However, a technology scale-up is currently in progress, which is expected to deliver enhanced features in a progressive rollout.

Multi-income source

As the platform is used by multiple partners, Zaggle has a wide range of paying customers. Its corporate customers pay Zaggle a platform fee, SaaS fee, and service fee for implementing its fintech offerings. These fees generate a substantial portion of the company’s revenue. In addition, Zaggle earns revenue by monetising its proprietary reward points system, Propel Points. The company also earns a portion of the interchange fees when users make transactions using their prepaid cards at offline or online merchant points of sale.

Zaggle’s business model goes beyond just offering fintech solutions. The company also partners with lending and wealth management partners to offer lending and wealth management products to Zaggle’s users. Under the terms of its contracts, Zaggle earns a referral fee for each loan or financial product used.

On the other hand, its business model has enabled Zaggle to acquire large user bases through corporate and SMB customers while limiting costs incurred on acquisition of new users relative to other fintech focussed players that have to spend a high customer acquisition fee.

Profitable from the word go

Unlike many other fintech platforms and unicorns that are operating in the marketplace, Zaggle is among the few that is not only fast-growing, but also profitable. No doubt, Zaggle’s commitment to diversifying its revenue streams and expanding its offerings is reflected in its financial performance. Revenues from operations have steadily increased over the past few years. Further, factors such as platform fees and cross selling has resulted in a sharp increase in revenue from Rs68.3 crore in FY20 to Rs371.6 crore in FY22. Besides, Zaggle is also among the few fintech companies that has been profitable as it has seen a rise in its user base. Zaggle’s net profits increased from Rs3.7 crore in FY20 to Rs41.9 crore in FY22.

  • Zaggle plans to leverage its strong customer relationships and invest in its sales and marketing capabilities

“Our diverse revenue streams allow us to offer comprehensive fintech solutions to our customers while maintaining low customer acquisition and retention costs,” says Godkhindi adding that “the platform fee, SaaS fee, and service fee, along with the monetisation of Propel Points, provides a steady source of revenue for us. Additionally, our partnerships with lending and wealth management partners allow us to offer their products to our users while earning referral fees”.

There are plenty of growth opportunities for the firm. At a basic level, according to a Frost & Sullivan report, more than 40 million new subscribers joined the Employees’ Provident Fund scheme from 2017 to 2020. As more employees are added and with further employee expense management, Zaggle should be able to continue to add users on its platforms easily. Zaggle plans to leverage its strong customer relationships and invest in its sales and marketing capabilities to continue acquiring new customers in India.

“Our focus is on increasing our customer base while simultaneously developing and launching new products and services to cater to the evolving needs of our customers. We believe that our strong customer relationships and experienced leadership team will enable us to continue our growth trajectory in the future,” says Godkhindi who plans to continue innovating and introducing new products and use cases.

“We intend to extend our technology platform with a view that the continued efforts of our technology team will offer a higher value proposition for certain customers and could result in an increased adoption of our products by both new and existing customers,” notes Godkhindi.

Investing for growth

Zaggle has continued to make further investments in its business both on the product development front as well as new business acquisition. In fact, Zaggle spends on research and development of new products. Its product development team undertakes market research, customer surveys, analysis of consumer and competitor data, testing of product builds, technology research, and innovative ways to implement new features.

Zaggle has also made investments in business promotion through its marketing efforts, utilising a combination of online and offline channels, as well as targeted communication and internal rewards programs, among other measures. These efforts include expenses towards brand awareness programs, coupons, giveaways, exhibitions, and advertisements, all aimed at increasing sales and driving user spends.

According to the company’s financial reports, business promotion expenses for FY20 amounted to Rs28.77 crore, which increased by 296.63 per cent to Rs114.11 crore in FY21, and further increased by 13.64 per cent to Rs129.67 crore in FY22. This increase was largely due to targeting mid-market and SMB customers while retaining a higher number of customers during the period.

  • We believe that our strong customer relationships and experienced leadership team will enable us to continue our growth trajectory in the future

“We remain committed to our focus on business promotion activities as we continue to reach out to new and existing customers,” says Godkhindi whose goal is to strengthen engagement with customers and promote the brand, driving adoption of the products and increasing user base to further drive spends.

Besides, India’s fintech scene is buzzing, with more than 1,860 innovative start-ups paving the way in segments such as payments, lending, wealthtech, insurtech, and neo-banking. With over 25 per cent of all start-up funding in India already pouring into the industry, investors are showing keen interest in this rapidly expanding market. So, it comes as no surprise that India is leading the pack when it comes to fintech adoption, with a staggering 87 per cent adoption rate compared to other countries, and the momentum shows no sign of slowing down anytime soon.

Thanks to favourable government policies and rising investments, experts predict that India’s fintech market revenue will soar from Rs2,87,030 crore in 2021 to a whopping Rs11,23,740 crore by 2027, according to the latest report by Frost & Sullivan. So, hold on tight, because the future of fintech in India is looking brighter than ever. With the rapid growth of the fintech industry in India, it’s clear that innovation and convenience are driving the future of finance. While Zaggle gears up for an IPO, its solutions and commitment to customer satisfaction position the company for continued growth in the fast-growing fintech industry.

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